Adding Fuel To The Fire

Not too many years ago, higher fuel prices were a non-issue with CropLife® 100 retailers. Indeed, in the 20th annual survey of the nation’s top ag retailers in 2003, fuel prices didn’t even rank among the top five issues when respondents were asked to list their key market concerns for the year. The following year, 2004, fuel prices again failed to register.

My, how things have changed. From a non-issue during the early 2000s, fuel prices have become the issue during the middle years of the decade. In our magazine’s 22nd annual CropLife 100 survey last year, concern over higher fuel prices easily led the field of top limiting growth factors at 53%.
Moving into 2006, higher fuel prices again look to be on pace to lead the top five limiting-factors pack. Although it’s still early in the survey collection process (with approximately 35% of the forms returned at presstime), 60% of responding retailers have indicated higher fuel prices as the biggest challenge to their profitability moving into the 2007 growing season.

“We are experiencing big pressure on margins and high expenses for things such as fuel,” says Peter Vail, president of Carolina Eastern-Vail, Inc., Niverville, NY. “At this time, we have not been able to recoup these added expenses.”

Presenting something of a perfect economic storm for retailers, there are indications that higher fuel prices are among the many factors that have severely curtailed grower-customer spending in 2006. According to Dan Kennedy, general manager for Ritter Crop Services, Marked Tree, AR, “the farm economy in general” is the biggest growth-limiting factor facing his company’s market at the moment.

And this downturn isn’t limited to Arkansas. According to the Economic Research Service, grower income is forecast to be down 26% for 2006 to $54.4 billion. More troubling, this figure is below the average 10-year grower income level of $57.2 billion.

Charging More

Not surprisingly, most retailers have responded to this fuel price crunch with multiple programs to recover their expenses. In CropLife’s 2005 CropLife 100 survey, we asked retailers how they were dealing with higher fuel costs. Seventy-one percent indicated they were simply charging more for their application work. The second most popular choice was adding a fuel surcharge to their grower-customer bills at 35%. Several retailers were employing both options in 2005 (hence the 106% total percentage figure illustrated in the numbers, because the question asked for respondents to mark all options that were being tried). Still, somewhat surprisingly, almost one in four (24%) of the CropLife 100 retailers in 2005 weren’t trying to recover their higher fuel costs from grower-customers. Perhaps these retailers were afraid adding such costs to their service fees would convince their clients to “shop around” and leave them.

This reluctance has apparently subsided in 2006, however. According to the surveys turned in so far for this year’s CropLife 100, just short of 90% of responding retailers are charging more or adding fuel surcharges to their grower-customer bills.

Of course, a few retailers have employed novel approaches to keep their businesses profitable in this higher fuel price climate. According to Kathy Sims, president of Sims Fertilizer & Chemical Co., Osborne, KS, her company’s grower-customers have helped curb costs through their growing practices. “The continual growth of no-till farming has been key for our business to combat high fuel and operating costs,” says Sims. “We’ve seen significant growth in the last few years.”

Others foresee higher fuel prices leading to some previously untapped market opportunities, for grower-customers and their dealerships alike. “Ethanol should increase corn acres, which will be good for us,” says Dennis Montavon, general manager for Effingham Equity, Effingham, IL.

Topics:

Leave a Reply

Management Stories

ManagementTechnology and agriculture: a Futurist’s Perspective
July 30, 2015
Futurist David Zach, speaking at this week’s InfoAg Conference in St. Louis, shared thoughts on the benefits and limitations of Read More
StewardshipOhio Water Quality Project To Determine How Much Phosphorus Is Leaving Fields
July 27, 2015
Researchers with the College of Food, Agricultural, and Environmental Sciences at The Ohio State University are looking for farmers in Read More
ManagementFCI Trade Summit Update & Precision Tank Turns 50
July 23, 2015
Editors Dave Frabotta and Eric Sfiligoj discuss the upcoming FCI Trade Summit in Las Vegas, NV, and how Precision Tank Read More
ManagementUpdates On UAV Rules & Crop Conditions
July 16, 2015
CropLife’s Paul Schrimpf and Eric Sfiligoj provide updates on the ongoing UAV regulations debate and how the nation’s crops are Read More
Top 100 Articles
CropLife 100Allied Ag Distributors Adds Four New Owners
July 30, 2015
Aligned Ag Distributors LLC has announced the addition of four new customer/owners to Franklin Holding Co. LLC. They are: The Read More
CropLife 100Pinnacle Purchases California-Based Specialty Crops Retailer
July 20, 2015
Pinnacle Agriculture Holdings has successfully acquired California-based NH3 Service Co.  Operating as part of Pinnacle’s Performance Agriculture brand, the new locations Read More
Asmus Farm Supply liquid fertilizer facility features 20,000 square feet
CropLife 100Slideshow: Asmus Farm Supply Shows Off Its New Liquid Fertilizer Facility
July 15, 2015
Asmus Farm Supply, Rake, IA, recently added a new liquid fertilizer facility to its company operations. The new liquid fertilizer Read More
CropLife 100Wilbur-Ellis Feed Division Facilities Receive Safe Feed/Safe Food Certification
July 13, 2015
Wilbur-Ellis Co.’s Feed Division, a marketer and distributor of value-added feed ingredients for the aquaculture, livestock and pet food industries Read More
CropLife 100BRANDT Expands To Brazil With Acquisition
July 8, 2015
BRANDT has acquired a majority interest in Target Brasil Fertilizantes Ltda. through its Brazilian subsidiary. Target Brasil manufactures, distributes and Read More
Milan Kucerak, president/CEO, West Central
CropLife 100West Central Cooperative And Its New President Are A Match Made In Deviation
June 29, 2015
To appreciate just how unique West Central Cooperative is in the world of ag retail, an observer need only consider Read More
Latest News
CropLife 100Allied Ag Distributors Adds Four New Owners
July 30, 2015
Aligned Ag Distributors LLC has announced the addition of four new customer/owners to Franklin Holding Co. LLC. They are: The Read More
FungicidesReport: Sudden Death Syndrome Symptoms Appearing In Soy…
July 30, 2015
Last week, symptoms of sudden death syndrome (SDS) began to appear in April 15-planted soybeans at the University of Illinois’s Read More
Seed/BiotechAdvanta Seeds Adds New Phoenix Corn Hybrids
July 30, 2015
Corn growers in the High Plains and Western states have new options available for the 2016 growing season from Advanta Read More
ManagementTechnology and agriculture: a Futurist’s Perspective
July 30, 2015
Futurist David Zach, speaking at this week’s InfoAg Conference in St. Louis, shared thoughts on the benefits and limitations of Read More
Biofuels Plant in Lousiana
Industry NewsIdle Biofuels Plant In Louisiana To Reopen As Ammonia F…
July 30, 2015
A Lithuania-based company plans to spend $265 million to reopen an idle biofuels refinery in Grant Parish as an ammonia Read More
FFA at Monsanto Booth at the 2015 National Farm Machinery Show
Industry NewsFive Students Receive The 2015 Monty’s Plant Food Compa…
July 29, 2015
This fall, five college-bound students will have financial support through the Monty’s Plant Food Company FFA Scholarship. All five scholarship Read More
GYPSOIL Blendable Pellets
Crop InputsBeneficial Reuse Management Launches Pelletized Gypsum …
July 29, 2015
Beneficial Reuse Management (BRM) announced this week at Ag Media Summit that its GYPSOIL Pelletized Products Division will open a Read More
StewardshipOhio Water Quality Project To Determine How Much Phosph…
July 27, 2015
Researchers with the College of Food, Agricultural, and Environmental Sciences at The Ohio State University are looking for farmers in Read More
FertilizerKoch Agronomic Services Launches N-TEGRATION Technology
July 27, 2015
Koch Agronomic Services, LLC (KAS) has launched  N-TEGRATION Technology, a process technology platform designed to enable production of enhanced efficiency fertilizers at Read More
HerbicidesExpert: IARC Herbicide Classifications Leading To Confu…
July 24, 2015
Few people in the crop protection industry had heard of the International Agency for Research on Cancer (IARC) before this Read More
ManagementFCI Trade Summit Update & Precision Tank Turns 50
July 23, 2015
Editors Dave Frabotta and Eric Sfiligoj discuss the upcoming FCI Trade Summit in Las Vegas, NV, and how Precision Tank Read More
Palmer pigweed seedhead in cotton
HerbicidesUSDA Deregulates Dow AgroSciences’ Enlist Cotton Trait
July 23, 2015
The USDA today issued its decision deregulating Dow AgroSciences’ Enlist cotton trait in the U.S. The USDA has now completed its Read More
Industry NewsVerdesian Life Sciences Showcases Versatile Product Por…
July 23, 2015
Technology has revolutionized agriculture by bringing farmers, retailers and distributors to the forefront of the digital age. To meet the Read More
FertilizerWSJ: Cf Industries Exploring Merger With Dutch Chemical…
July 23, 2015
U.S. fertilizer maker CF Industries is in advanced merger talks with Amsterdam-listed chemical company OCI NV, the Wall Street Journal Read More
HerbicidesNufarm Releases New Panther SC Herbicide
July 23, 2015
Nufarm has announced the availability of new Panther SC herbicide. Panther SC is the first liquid formulation of flumioxazin available Read More
EquipmentFarmLink Launches Farm Equipment Sharing Program
July 23, 2015
FarmLink has introduced a new online farm equipment sharing community – MachineryLink Sharing – leveraging this new economy business model Read More
HerbicidesCould The South’s Most Troublesome Weed Represent A Thr…
July 22, 2015
Palmer amaranth is undoubtedly the most troublesome weed in the southern United States, taking a devastating toll on both cotton Read More
Industry NewsH.J. Baker Hires New Director Of International Sales
July 22, 2015
Global Agriculture firm H.J. Baker announced today that Steve Langley has joined the company’s Crop Performance Division and Animal Health Read More